Markets shifting back to risk-on as data shows Omicron may not be as bad as the Delta variant which could mean the economic disruptions will be less severe too. Maybe Santa’s rally can actually happen.
The Daily US Dollar Index (DXY) chart is still overall bullish, but the below intraday chart shows how traders from the start of the London open into the US open has been selling off. The shift has been out of safe-haven currencies and into the commodity pairs, which can be seen in the forex heatmap at the London close.
According to the US Bureau of Economic Analysis report published today, the US gross domestic product (GDP) grew by 2.3%, which is more than the expectations of 2.1% for the third quarter of 2021. COVID's resurgence in some parts of the country has resulted in new restrictions and delays in the reopening of establishments, according to the GDP report, and the relatively small increase in third-quarter GDP reflects the continuing economic impact of the pandemic and reduced fiscal flows from the highs of March 2021.
All the major indices are green for the day at the end of the London session on the better-than-expected US GDP numbers and also as the Omicron variant is expected to be classed as less dangerous than the Delta variant. Both the British government scientists report from UK HSA and a Scottish study conclude the chances of becoming seriously ill with Omicron is less than if you contract the Delta variant. The booster jab is still expected to reduce the probability of being severely ill and hospitalized.
The Nasdaq has for the second consecutive day broken higher out of the initial balance range and approached the measured move as traders keep buying the dip. Tesla shares surged over 7% after Elon Musk's remarks on not planning to sell any more of the company's shares, hit the news wires which helped boost the S&P500 and Nasdaq 100. There was also news out from the US Conference Board Consumer Confidence Index which increased again in December, after an upward revision in November.
US crude oil stockpiles fell by 4.7 million barrels to 423.6 million barrels in the week ending December 17, according to the US Energy Information Administration. Petroleum. During the same week, crude oil refinery inputs averaged 15.8 million barrels per day, 148,000 barrels per day higher than the previous week. This is highlighting an increase in demand and the price of Brent is higher on the back of this hawkish news. The rise in Brent has now almost reversed last week's declines which were accelerated by worries of demand destruction due to Omicron spreading around the globe.